You know we're on to something when even Fox News decrys an instance of health care price gouging. It's remarkable when the WSJ runs the story without pro business spin. FDA approval of Makena, a drug that stalls premature birth, legally allows KV Pharmaceuticals to price gouge. Weekly injections of progesterone is standard practice to treat women for premature labor. Sometimes, these treatments go on for as long as 20 weeks (1/2) of the pregnancy. Compounding pharmacies mixed up these injections for $10-20 each injection, but some compounders created better solutions than others and the FDA wanted to standardize the drug for safety purposes. It's hard to argue with safety, but KV Pharmaceuticals plans on charging $1,500 per dose for the progesterone drug. Plus, KV Pharmaceuticals isn't known for their safety record. In fact, their rep is quite the opposite. Increasing the price by 75-150 times is mind boggling. The FDA approved Makena via the "orphan drug" law of streamlined FDA approval. Low income and uninsured pregnant women lose.
Ok, the orphan drug law has merit, but giving one pharmaceutical company exclusive rights to sell an orphan drug for 7 years for a condition as pervasive as premature labor isn't in America's best interest. It was however, in the best interest of KV Pharmaceuticals to go after the deal and move on from their past mistakes.
The orphan drug law is good for people with obscure, rare medical conditions, but they and their insurers pay dearly for the relief. It's very good for greed based pharmaceutical financial statements. It isn't good for Medicaid, Tricare, Medicare or any private health insurer and the people who fund those insurers. Some patients appreciate the drugs this law has brought to market, but Makena patients aren't in this group. What is clear, is that the immediate, exponential cost increase is not good for the tax payer, employers or health care policy holders. Meanwhile KV Pharmaceuticals is poised to add billions in annual revenue and their shareholders aren't complaining.
Abusing the orphan drug law isn't new and really, it shouldn't be that surprising. It's simple economics. A state sanctioned monopoly leads to state sanctioned price gouging. There's nothing to stop KV Pharmaceuticals from charging what they will. Insurers will pay, but it's likely that uninsured pregnant women and underinsured pregnant women will have a sharp increase in premature births, babies with permanent, developmental problems and perinatal deaths. That's what happens in a greed based health care system.
Hmmmmm, where's the Catholic Church on that? Where's Operation Rescue? Where's the "pro-life" brigade? Why aren't they pitchin' a bitch on this shameless assault on the unborn? Yeah, the hypocrisy is pretty blatant.
What's most striking in looking at Makena as an orphan drug is that premature labor isn't that rare as it affects about 12% or 1 in 8 pregnancies. That's anywhere between 500,000 to 650,000 women annually, depending on how you calculate the incidence rate of premature labor. (Compare this stat with a total world wide incidence rate of 5,000 Fabry sufferers.) The orphan drug law was to help people with rare conditions, not mainstream conditions. Makena has exclusive FDA approval for 7 years and we get to pay the piper for this folly.
The orphan drug law has a couple components to it:
What is the Orphan Drug Tax Credit?
The credit is available for testing expenses for drugs, vaccines, diagnostic drugs, or preventive drugs, used to treat rare diseases or conditions. A rare disease or condition is defined as one which:
(A) affects less than 200,000 persons in the United States, or
(B) affects more than 200,000 persons in the United States, but there is no reasonable expectation that the cost of developing and making available in the United States a drug for disease or condition will be recovered from sales in the United States of such drug.
The credit is available for any indication that meets these criteria, even if the product itself is used for other indications that are not qualified. Thus, for example, BMS's Taxol has qualified for use for AIDS-related Kaposi's sarcoma, an indication that qualifies as a rare disease, while the largest market for Taxol is for breast cancer, a disease with a client population much greater than 200,000.
The tax credit is normally for 50 percent of the costs of clinical testing expenses, which the IRS defines (see form 8820) as human clinical testing for a disease or condition under section 505(i) of the Federal Food, Drug and Cosmetic Act. The full 50 percent applies to contract research expenses as well as in-house research expenses, but does not apply to expenses that are funded under a government contract or grant. Both successful and unsuccessful products qualify for the tax credit. Normally the credit is limited to clinical testing that takes place in the United States, although it is available for foreign trials when there is an insufficient testing population in the US.
The orphan drug law was created to help people with rare conditions, not mainstream ones. Makena qualified because the $20 per dose price tag made it look relatively unprofitable to pharmaceutical companies, but really now, $20 a hit is a pretty good price point. No one would have objected too much if the price doubled or tripled in return for the standardization and safety of Makena. Giving KV Pharmaceuticals a generous tax credit for developing the standardized drug is what the orphan Drug Law was meant to do, but the exponential price increase is offensive. The new price is 75-150 times the original price and because we're talking about babies, KV Pharmaceuticals is betting that new parents will pay it. Makena illustrates the problem of our failing health care system that rewards greed over lives.
This iisn't the first time the FDA awarded orphan drug status to a wide spread health problem for a compounded drug used for decades. Awarding Makena orphan drug status complicates the situation because compounding pharmacies can no longer make this drug for the lower price unless it is significantly different than Makena. Being as this drug is used for pregnant women, compounding pharmacists and physicians will approach this problem cautiously.
In KV Pharmaceutical's defense, this product fits well into their business plan. They aren't breaking any laws. They are simply recouping their investment into a product that wasn't expected to generate a lot of revenue. They also created an assistance program for Makena, but no one knows at this point how effective it will be. Getting orphan drug status was part of the negotiations. I fault the FDA for caving into the demand. The Orphan Drug Law has a liberal definition of what constitutes a rare disease and doesn't require or define a means test to qualify as an orphan drug. I can't fault KV Pharmaceuticals for making a good business decision that should add $10 billion to their annual revenue stream. I fault ignorant lawmakers for writing a law that can be abused this way and the FDA for facilitating the abuse.